Pre Production and Retail Pricing Numbers Guesstimated
BusinessWeek has just posted an informative new piece that actually sheds some new light on the Palm Pre's potential assembly cost. Entitled "An Early Peek Under the Palm Pre's Hood", the article is written by Arik Hesseldahl and dated today.
Based primarily around a recent report from industry assembly cost firm iSuppli, Hesseldahl claims that the Palm's manufacturing cost is currently estimated to be approximatey $138. While key component prices, especially NAND flash memory, do fluctuate almost daily, Palm's healthy margins on the device should only increase over time, as production is ramped up. iSuppli analyst Tina Teng is quoted extensively within the article and stresses that a great deal of speculation has been used to arrive at these figures as no actual production Pre devices have been made available for an actual "teardown".
The multitouch 3.1" LCD touchscreen, provided by Cypress Semiconductor, is the Pre's most expensive component set, totaling $39.51. No new details are confirmed in the report, such as whether or not the Pre's screen is glass like the iPhone or the cheaper, lighter, and more scratch-prone plastic as rumored in the Angelina Jolie story from a few weeks ago.
Aside from an actual release date, the most anticipated detail about the Pre is its cost to consumers at retail. Assuming the usual 2yr-contract pricing, the pierce reveals that Sprit is likely to offer the handset at $200, subsidizing $100 of the purchase price from Palm. With this sort of cost structure in place, Palm's battered profit margins should finally improve after numerous consecutive quarters of relatively slow Windows Mobile sales and tiny margins on the Palm Centro.
With the earlier report that the low-cost SERO plan will not be applicable to the Pre, Sprint should nicely make up the subsidy by pushing users towards its Simply Everything unlimited plans. No mention is made within the article about Palm hedging their bets on a high attach rate of software purchased from their app store or on any kind of revenue sharing between Palm, Sprint, and Amazon.
The article concludes with some speculation about potential additional costs to the device totaling approximately $22.61. Software licensing fees and patent royalty payments comprise these additional charges, making the Pre's final cost to Palm somewhere in the neighborhood of $170, or as Teng is quoted, "…about 56" of the $300 price at which Palm is expected to sell the device to Sprint".